Independent auditor's report

^{This independent auditor’s report is an English translation of the signed Dutch independent auditor’s report as issued at 16 February 2024}

To the shareholders and the Supervisory Board of Stedin Holding N.V.

Report on the audit of the financial statements 2023 included in the annual report

Our opinion

We have audited the financial statements 2023 of Stedin Holding N.V. (hereafter: Stedin Group) based in Rotterdam. The financial statements comprise the consolidated financial statements and the company financial statements, as included on page 144 until 216 of the annual report.

In our opinion:

• The accompanying consolidated financial statements give a true and fair view of the financial position of Stedin Groupas at 31 December 2023, and of its result and its cash flows for 2023 in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.        

• The accompanying company financial statements give a true and fair view of the financial position of Stedin Group as at 31 December 2023, and of its result for 2023 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
  

The consolidated financial statements comprise:

1. The consolidated balance sheet as at 31 December 2023.

2. The following statements for 2023: the consolidated income statement, the consolidated statements of comprehensive income, consolidated statement of changes in group equity and consolidated cash flow statement.

3. The notes comprising material accounting policy information and other explanatory information.

The company financial statements comprise:

1. The company balance sheet as at 31 December 2023.

2. The company income statement for 2023.

3. The notes comprising a summary of the accounting policies and other explanatory information.

Basis for our opinion

We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the ‘Our responsibilities for the audit of the financial statements’ section of our report.

We are independent of Stedin Groupin accordance with the EU Regulation on specific requirements regarding the statutory audits of public interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information in support of our opinion

We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion was addressed in this context, and we do not provide a separate opinion or conclusion on these matters.

Materiality

Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR20 million. The materiality is based on 3,3% of EBITDA (i.e. the result before financial income and expenses, taxes, depreciation and amortization) as defined by Stedin Group in note 33 of the annual report. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.

The audits of significant components within the group have been performed with a materiality that has been determined by the group audit team, varying from EUR 10 million to EUR 18 million.

We agreed with the Supervisory Board that misstatements in excess of EUR1 million, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.

Scope of the group audit

Stedin Group is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of Stedin Group.

Our group audit mainly focused on significant group entities. We ourselves have performed audit procedures for entities Stedin Holding N.V. and Stedin Netbeheer B.V. We have performed specific audit procedures for other entities. By performing the procedures mentioned above at (group) entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group’s financial information to provide an opinion on the consolidated financial statements.

Our focus on the energy transition

Climate change increasingly impacts our environment and society, in which the energy system will change drastically. As regional grid operator, Stedin Groupplays a crucial role in this changing energy system.

The Board of Directors has summarized the effect of the energy transition on Stedin Groupand its plans under the energy transition, including related impacts, challenges, uncertainties, and opportunities in the chapters “Where we are now” and “Full focus on further accelerating” of the annual report.

The impact of the energy transition on the financial statements is explained in note 2.3. It is mainly reflected in the increase in the level of investment in the electricity network and its financing as explained in note 13, note 22, and note 25. Additionally, the energy transition affects the assumptions regarding the estimation of the useful life and depreciation method of Stedin Group’s assets, including its gas network, as explained in note 2.3.

As part of our audit of the financial statements, we evaluated how Stedin Grouptakes into account the effects of the energy transition in estimates and significant assumptions. We also refer to our Key Audit Matters of the audit.

Additionally, we have read the annual report and considered whether there is a material inconsistency with the financial statements. Finally, we have performed assurance work on specific non-financial information for which we refer to our separate assurance report.

Audit approach fraud risks

We identified and assessed the risks of material misstatements of the financial statements due to fraud.

During our audit we obtained an understanding of the entity and its environment and the components of the system of internal control, including the risk assessment process and management’s process for responding to the risks of fraud and monitoring the system of internal control and how the Supervisory Board exercises oversight, as well as the outcomes. We refer to section "Fraud prevention" in the “Organization and Management” chapter of the annual report for the approach that management follows concerning the fraud risks.             

We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as among others the code of conduct, whistle blower procedures and incident registration. We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness, of internal controls designed to mitigate fraud risks.

As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption in close co-operation with our forensic specialists. We evaluated whether these factors indicate that a risk of material misstatement due fraud is present.

We have identified the fraud risk assumed in the audit standards related to breaches of internal control measures by the Board of Directors and management, including whether there are indications of tendencies that may potentially pose a risk of a material misstatement resulting from fraud.

We have performed substantive procedures, including journal entry testing, evaluating estimates and assumptions for tendencies (including retrospective review of significant estimates from the previous fiscal year), and testing the substantiation of adjustments made during the preparation of the annual accounts. The significant estimates and assumptions that may have a significant impact on the financial statements are explained in note 2.3 of the financial statements.

We incorporated elements of unpredictability in our audit. We also considered the outcome of our other audit procedures and evaluated whether any findings were indicative of fraud or non-compliance.

We considered available information and made enquiries with the Board of Directors, management (including including the Corporate Affairs, Compliance & Integrity, Corporate Risk Management, and Internal Audit departments.), management (including the Corporate Affairs, Compliance & Integrity, Corporate Risk Management, and Internal Audit departments), those charged with governance and others within the group.

We evaluated whether the selection and application of accounting policies by the group, particularly those related to subjective measurements and complex transactions, may be indicative of fraudulent financial reporting. From this, no indications of fraud were identified that could lead to a material misstatement.         

Audit approach compliance with laws and regulations

We assessed the laws and regulations relevant to the Company through discussion with management, those charged with governance and others and through reading minutes and reports of internal audit.

We involved our forensic specialists in this evaluation.

As a result of our risk assessment procedures, and while realizing that the effects from non-compliance could considerably vary, we considered the following laws and regulations: adherence to (corporate) tax law, the requirements under the International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and Part 9 of Book 2 of the Dutch Civil Code with a direct effect on the financial statements as an integrated part of our audit procedures, to the extent material for the related financial statements.

We obtained sufficient appropriate audit evidence regarding provisions of those laws and regulations generally recognized to have a direct effect on the financial statements.

Apart from these, the Stedin Groupis subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts and/or disclosures in the financial statements, for instance, through imposing fines or litigation. We have identified the Electricity Act 1998, Gas Act, General Data Protection Regulation, and the Public Procurement Act 2012 that are most likely to have such an influence.

Given the nature of Stedin Group’sbusiness and the complexity of this other legislation and regulations, there is a risk of non-compliance with the requirements of such laws and regulations. In addition, we considered major laws and regulations applicable to listed companies.     

Our procedures are more limited with respect to these laws and regulations that do not have a direct effect on the determination of the amounts and disclosures in the financial statements. Compliance with these laws and regulations may be fundamental to the operating aspects of the business, to Stedin Group’sability to continue its business, or to avoid material penalties (e.g., compliance with the terms of operating licenses and permits or compliance with environmental regulations) and therefore non-compliance with such laws and regulations may have a material effect on the financial statements. Our responsibility is limited to undertaking specified audit procedures to help identify non-compliance with those laws and regulations that may have a material effect on the financial statements. Our procedures are limited to (i) inquiry of management, the Supervisory Board, the Executive Board and others within Stedin Group’s as to whether the Stedin Groupis in compliance with such laws and regulations and (ii) inspecting correspondence, if any, with the relevant licensing or regulatory authorities to help identify non-compliance with those laws and regulations that may have a material effect on the financial statements.

Naturally, we remained alert to indications of (suspected) non-compliance throughout the audit.

Finally, we obtained written representations that all known instances of (suspected) fraud or non-compliance with laws and regulations have been disclosed to us.

Audit approach going concern

As described in note 2 of the financial statements, management has composed the financial statements of Stedin Group with the assumption that the continuity of the entity is maintained and that it will continue its activities for the foreseeable future.

We have evaluated this judgement from management, in which we have considered whether this decision has been made including all relevant information of which we have become aware of as a result of our audit. This includes evaluating the liquidity and financing elements in Stedin’s financial strategic plan (FSP), and the underlying developments and assumptions for both long- and short-term.

Our work performed has not led to results that are not consistent with management’s assumptions and judgments when applying the going concern assumption.

Our key audit matter

As key audit matter, we describe those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matter to the Supervisory Board, but is not a comprehensive reflection of all matters discussed.

We designed our audit procedures in the context of our audit of the financial statements as a whole and in forming our opinion thereon. The following information in support of our opinion was addressed in this context, and we do not provide a separate opinion or conclusion on this matter.

Key Audit Matter 2022

In the previous year, the developments in Stedin Group's In Control Framework were identified as a key audit matter. Given the developments in the In Control Framework, as also mentioned in the In Control statement of the Board of Directors, this topic is no longer identified as a key audit matter.

Report on the other information included in the annual report

The annual report contains other information, in addition to the financial statements and our auditor’s report thereon.

The other information consists of:

• The Report of the Board of Management, divided into the chapters “Introduction”, “Where We Are Now”, “Full focus on further accelerating”, and “Organization and management”.

• The Report of the Supervisory Board, included as part of the chapter “Organization and management”.

• Other information.

• Supplementary information.
  

Based on the following procedures performed, we conclude that the other information:

• Is consistent with the financial statements and does not contain material misstatements.

• Contains all the information regarding the management report and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.
  

We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.

By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.

Management is responsible for the preparation of the other information, including the Management Board's Report in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirement      

Engagement

We were engaged by the Supervisory Board as auditor of Stedin Group,as of the audit for the year 1997 and have operated as statutory auditor ever since that financial year.

No prohibited non-audit services

We have not provided prohibited non-audit service as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audits of public interest entities.

Description of responsibilities regarding the financial statements

Responsibilities of the Board of Management and the Supervisory Board for the financial statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, management is responsible for assessing the company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.

Management should disclose events and circumstances that may cast significant doubt on the company’s ability to continue as a going concern in the financial statements.

The Supervisory Board is responsible for overseeing the company’s financial reporting process.

Our responsibilities for the audit of the financial statements

Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.

Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.

We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:

• Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control.

• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the company to cease to continue as a going concern.

• Evaluating the overall presentation, structure and content of the financial statements, including the disclosures.

• Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  

Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.

We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identified during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.    

We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

Rotterdam, 16 February 2024

Deloitte Accountants B.V.

Digitally signed on the original: drs. A. van der Spek RA